11/18/2013 -
According to a report by James Poole on behalf of Bloomberg, "Global rubber consumption will grow at an average of 3.5 percent a year through 2018 as demand increases for replacement tires, supporting prices of the commodity, according to LMC International Ltd. “Looking forward to 2018, we’re expecting a pickup in tire demand,” Gerard Stapleton, head of Southeast Asian research for LMC, said in an interview in Kuala Lumpur. “That’s going to support the rubber market.” Natural rubber traded in Tokyo entered a bull market in August as economic growth in China, which consumes about a third of the world’s production, accelerated for the first time in three quarters in the July-September period. Car sales in the country jumped 21 percent in September to an eight-month high, contributing to what LMC Automotive Ltd. says would be record global purchases in 2013. Emerging markets “are going to form the basis for future replacement tire demand,” Stapleton said at a conference before the interview. By 2020, China will account for 35 percent of global output of light vehicle tires from 23 percent in 2010 and 52 percent of medium or heavy commercial vehicle tires from 43 percent, his presentation showed. Rubber futures closed at 262.7 yen a kilogram ($2,699 a metric ton) on the Tokyo Commodity Exchange recently, advancing 17 percent from a nine-month low in June to trim this year’s retreat to 13 percent. Prices, which slumped as much as 62 percent since peaking in 2011, will climb to 300 yen by December 31, according to a Bloomberg survey published October 8. While China’s economy grew 7.8 percent in the third quarter, the International Monetary Fund on October 8 cut its outlook for this year and next. The fund cut the forecast for China to 7.6 percent this year from 7.8 percent in July and to 7.3 percent in 2014 from 7.7 percent. Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the IMF said in a report, compared with July predictions of 3.1 percent for 2013 and 3.8 percent for 2014. The lower IMF forecasts will lead to a revision of the International Rubber Study Group’s projections for growth in rubber and tire demand this year, which currently stand at 3 percent and 5.3 percent respectively, according to its senior economist Lekshmi Nair. “The tire replacement market and the sales market in Europe and the U.S. is not coming up the way we expected at the beginning of this year, so that will have an impact on our consumption forecast,” Nair said in an interview. The new forecasts may be released in the first week of December, Nair said. Global rubber output will climb 4.5 percent in 2014 from an estimated 11.7 million tons this year as plantings between 2006 and 2008 come into tapping, she said. Tires represent 70 percent of natural-rubber consumption in China, the Qingdao International Rubber Exchange Market estimates. Wholesale deliveries of cars, multipurpose and sport-utility vehicles climbed to 1.59 million units last month, the most since the 1.73 million sold in January, the state-backed China Association of Automobile Manufacturers said October 11. Global automobile sales will rise 2.9 percent to an all-time high of 83.5 million units this year and another 5.4 percent to 88 million in 2014, according to Ammar Master, a senior market analyst at the Thai unit of Oxford, England-based LMC Automotive. “Future growth is expected to be dominated by the emerging markets, driven by domestic and export demand,” said Stapleton, referring to production of light vehicles and tires. Thailand, Indonesia and Malaysia are the world’s biggest natural rubber producers, representing about 70 percent of supply.

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